PIANH Conference Hears Candid Discussion on Insurance Market

The annual Conference of the Professional Insurance Agents of New Hampshire (PIANH) featured a panel discussion on the hardened insurance market, entitled “Market Conditions and Strategies for 2002,” Moderated by Jeff Foy, of the Foy Insurance Group, which the organization called “surprisingly candid.”

The panelists were John Gray, senior VP of General Reinsurance Corp.; John Natale, marketing VP of Royal Insurance Co.; Larry Shaw, president and CEO of Maine Mutual; and Bob Zak, president and CEO of Merchants Insurance Group, who “offered insight on the conditions of their own companies and predictions for the industry as well.”

Gray began the session with an overall survey of the industry. He noted that there are only about 25 reinsurance companies worldwide, and said there’d been a complete turn over in the industry’s CEOs over the past three years with many companies leaving the industry. “T

he industry has become tiered, with the second-tier companies losing profits and leaving the business altogether. The business is becoming more difficult to understand,” he stated. “More companies are leaving the facultative part of the industry and more reinsurers will leave the business.”

The panel moved on to a discussion of the effects of Sept. 11 and the ongoing efforts to combat terrorism. Panelists noted that virtually all companies were facing more stringent underwriting standards, and higher premiums from the reinsurers, while terrorist coverage continued to be very hard, and expensive, to place.

Another ongoing trend the panelists agreed was a general “flight to quality,” with top tier companies commanding a greater share of the reinsurance market, as they continue to be in a position to impose higher premiums. This has lock on affect on primary insurers.

“We get asked a lot why a company like ours is responding (to market conditions) like we are,” Larry Shaw stated. As a response, he likened Maine Mutual’s capacity for new business and renewals to a single gallon bucket, compared to a 100-gallon bucket in which all of the industry’s business is held. “We want our one gallon to be the best possible, so we can become better, stronger. Maine Mutual plans to achieve this by being as aggressive as the company can,” Shaw continued. “I still believe the rates are inadequate.” He indicated that the company has tightened its selection criteria for risks. “We are turning down more than 50 percent of the business that comes to us.”

Gray stated that he’d observed the following changes in the industry. “The definition of cat. (catastrophe) perils is changing; mold, e-risks, aggregation of expenses, directors and officers and umbrellas have taken on new importance and difficulty.”

“I was very impressed that three competitors would stand in front of this group and be so honest,” one participant noted. “If only every presentation were this good.”